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07.12.12

How Fossil-Fuel Democrats Became An Endangered Species

Obama’s heavy-handed regulation of the booming old-energy economy has left his party with few friends in the energy belt, writes Joel Kotkin.

In an election pivoting on jobs, energy could be the issue that comes back to haunt Barack Obama and the Democratic Party as the cultural and ideological schism between energy-producing Republican states and energy-dependent Democratic ones widens.

As the economy has sputtered since 2008, conventional energy has emerged as one of the few robust sources of high-paying work, adding roughly half a million jobs since 2007 as new technologies and changing market conditions have opened up a vast new supply of exploitable domestic reserves. This is good news for Mitt Romney: nine of the ten states that rely most heavily on the sector for jobs are solidly behind him. (Colorado, where polls show Obama with a narrow lead, is the one exception).

President Obama’s heavy-handed regulation of the booming old-energy economy—the moratorium on offshore drilling following the BP spoil, the decision to block the Keystone XL Pipeline, and the prospect of a fracking ban—and his embrace of green-energy policies has played well in the solidly Democratic post-industrial coastal economies that he also depends on for fund-raising. But it’s left him with few friends in the energy belt that spans the Great Plains, the Gulf Coast, Appalachia and now some parts of the old rustbelt, despite his election-year claims of an “all-of-the-above” energy policy.

It’s a far cry from Bill Clinton, whose close ties with Great Plains and Gulf Coast Democrats and energy producers there helped him twice carry Louisiana, Kentucky and West Virginia—all states that appear to be solidly behind Romney this year.

Today, Democratic senators in regions that depend on fossil fuels are becoming an endangered species. Over the past two years, Virginia’s Jim Webb and Byron Dorgan and Kent Conrad, both from booming North Dakota, have announced their retirement or retired, while Montana’s Jon Tester has distanced himself from the president as he faces a difficult re-election fight. And that diminishing presence in turn means less intra-party resistance to any potential second-term plans to cut the burgeoning fossil-fuel business to size.

The administration’s hostility to the dirty business of energy, and the sector’s fear of new bans or regulations in a second Obama term that would gut the industry were perhaps best captured by the then-EPA administrator who claimed Administration policy was to “crucify” fossil fuel.

Yet as Obama pursues a 50-percent-plus-one re-election strategy reminiscent of President Bush in 2004, his energy approach has been embraced by his core constituents, particularly the public-sector union workers and urbanized “creative-class” members. This is particularly true in the coastal enclaves like New York and California that import much of their energy (and in California’s case in particular has declined to exploit its own considerable reserves). Sixty-percent of the electricity in Los Angeles, a key bastion of Obama support, comes from coal-fired plants in Utah and Arizona; much of the natural gas that provides nearly half of the power for California’s grid is imported. While Pennsylvania and Ohio have exploited their large shale reserves that have become vastly valuable in recent year thanks to new extraction techniques and shifting energy prices, New York State has yet to follow suit, even as New York City lacks the supply to match peak summer demand, forcing it to depend on an aging nuclear power plant at Indian Point that’s years overdue to close.

If anything, the pressure from environmental activists , many of them well-heeled and living far removed from power sources and the jobs they create, is for Obama to go even further. A few rich donors from the green lobby complain the President has not been environmentally correct enough; Mother Jones actually asked if Obama has been “morphing into Dick Cheney” on energy issues.

But for the most part, the coasts are on board with Obama’s energy policy. Silicon Valley and Wall Street have invested heavily in the renewable industries favored and frequently propped up by the administration, putting their money where Obama’s mouth is. Silicon Valley hegemons like venture capitalist John Doerr and Wall Street giants like Goldman  Sachs regard the green energy business as a profitable, state-supported way to grow their profits. One disgusted  venture investor described the investors in the heavily subsidized green game as “venture porkulists.

Bill Clinton twice carried Louisiana, Kentucky and West Virginia—all states that appear to be solidly behind Romney this year.

These investments are now critical to many powerful tech firms, who increasingly have little domestic involvement in the manufacturing businesses that was central to a prior generation of Silicon Valley titans. Google alone has invested more than a billion dollars in the green-energy sector, as the valley’s new dominant clique of venture capitalists and tech executives donate at record levels to the president’s re-election.

Nowhere is the element of choice inherent in energy policy more evident than in California, home to five of the nation’s twelve largest oil fields and energy reserves equal to those of Nigeria, the world’s tenth-largest producer. As high-paying energy jobs swell payrolls in the Great Plains, the Intermountain West and parts of the Gulf, the Golden State has double-digit unemployment, a collapsed inland economy and a series of bankrupt municipalities. Amidst a great national energy boom, California’s energy production has remained stunted even as the state’s draconian “renewable” energy mandates are slated to drive up its already high electricity rates. The state’s high cost of energy has impacted industry:  despite its vast human and natural resources, the Golden State, with 12 percent of the nation’s population received barely 2 percent of the country’s manufacturing expansions last year.

Such inattention to California’s resources may be popular in wealthy precincts of Silicon Valley, San Francisco and west Los Angeles, but the state’s green approach has helped place traditionally manufacturing-oriented communities such as Oakland, east Los Angeles, San Bernardino and Stockton in deep distress. Despite central California’s vast deposits of oil and gas, unemployment rates in some oil-rich areas there are over 15 and sometimes even 20 percent. 

As economic forecaster Bill Watkins recently told an audience in hard-hit Santa Maria: “If you were in Texas, you’d be rich.”

Meanwhile  the fossil-fuel energy producers, related chemical manufacturers  and financiers who are getting rich, from the Koch Brothers to Chesapeake Energy and Arch Coal, have been investing in Romney and the super-PACs supporting him.

Much of the money they’re pouring in will likely be spent persuading voters in the four crucial energy states–long-time producers New Mexico and Colorado and emergent natural gas producers Ohio and Pennsylvania—that will be up for grabs in November. Colorado has generated more than 20,000 while new energy jobs since 2000, third highest in the nation, while Ohio and Pennsylvania combined have created 25,000 new energy jobs in that span—and that’s not counting the services those largely  well-paid workers demand or the new manufacturing jobs making pipes and compressors the industry creates. What all four contested states have in common is that their energy sectors are pitted against powerful competing interests, including true-blue urban constituents, and tourism and technology sectors that employ workers and industries more concerned with the local environment than with energy-driven growth.Still, a boom is a boom, and President Obama is doing his best to claim credit for the huge surge in oil and gas production under his watch, although the increase has been almost completely on private and state lands outside his reach. Production on federal lands has actually dropped. Yet his “all of the above” rhetoric comes off as more evenhanded and substantial than the drill- baby-drill GOP set.

Romney, though, can point to a series of Obama decisions and priorities—including the painfully slow resumption of Gulf Shore oil operations after the BP spill, the effective veto of the Keystone XL pipeline, and proposed EPA greenhouse gas restrictions—as mortal threats to the American energy boom. He can also contrast the economic rise of energy-friendly Texas with the troubles of hyper-green California.

Whether Romney, far from a master communicator, is savvy and bold enough to stick the point may prove decisive in November.